German shipping group picks up Middle Rd building for S$60m

Thu, Oct 12, 2017

Kalpana Rashiwala

THE Prospex, a nine-storey retail and office building next to Bugis+, is being sold for S$60 million to a German shipping group.

BT understands that the buyer is Bernhard Schulte Investment Holding, part of the Hamburg-based Schulte Group, a leading independent family-owned shipowner and ship manager.

The group's unit Bernhard Schulte Shipmanagement currently has offices in leased premises at Gateway East on Beach Road.

According to the grapevine, the group will probably eventually occupy the bulk of The Prospex, which is being sold by Pamfleet, a Hong Kong and Singapore-based property fund manager.

According to the Schulte Group website, "we own real estate for our own use, as a portfolio diversification and to hedge against risks in our other businesses".

The Prospex is about 85 per cent leased. Only the top floor and a few units on the other levels are understood to be vacant.

The existing leases in the building expire at various times over the next three years, BT understands.

The S$60 million price tag works out to around S$1,950 per square foot based on the existing net lettable area (NLA) of about 30,800 square feet.

However, the price works out to a lower S$1,784 psf based on the potential total NLA of 33,631 sq ft, assuming the building is entirely leased to full-floor tenants.

The Prospex is on a site with a 99-year leasehold tenure starting from Dec 1, 1974; this translates to a balance term of about 56 years.

JLL brokered the sale but declined to comment.

Located at the busy corner of Middle Road and Victoria Street and just a stone's throw from Bugis MRT Station, The Prospex consists of a two-level retail podium (with 4,040 sq ft NLA) and seven levels of offices above.

Tenants in the building include the second Singapore branch of Shanghai-based Mellower Coffee (which occupies the entire two-level retail podium); 701 Search, a digital media company; and Zrii, an international nutrition company based in Draper, Utah.

Based on The Prospex's existing rental income and assuming that the rest of the vacant space were to be leased, the price paid by Schulte Group translates to a net yield of about 4 per cent, market watchers said.

Word on the street is that Pamfleet will realise a small return from its investment. It acquired the former Bright Chambers on the site for S$45 million in 2013 and made major additions and alteration works to the building which some players estimate could have cost slightly over S$10 million - resulting in its current modern look. The Prospex received a Temporary Occupation Permit in the first quarter of 2016.

The S$60 million which the property is changing hands at is lower than the "in excess of S$70 million" indicative guide price when it was most recently launched for sale in February this year, which in turn was lower than the S$80 million asking price when the building was put up for sale on an enbloc basis in 2015.

Pamfleet's sale of the property is expected to be completed towards the end of this month.